Saturday, 5 September 2015

❖ RuPay is a combination of two words – Rupee and Payment. RuPay Card is an Indian version
of credit/debit card. It is very similar to international cards such as Visa/Master.

❖ RuPay is the Indian domestic card payment network set up by National Payments Corporation of India (NPCI) at the behest of banks in India with the approval of Reserve Bank of India.

❖ It is created to fulfill the Reserve Bank of India's desire to have a domestic, open loop, and multilateral system of payments in India.

❖ RuPay facilitates electronic payment at all Indian banks and financial institutions, and competes
with Master Card and Visa in India.

❖ NPCI maintains ties with Discover Financial to enable the card scheme to gain international acceptance.

❖ National Payments Corporation of India (NPCI) has a plan to provide a full range of card payment services including the RuPay ATM, RuPay Micro ATM, Debit, Prepaid and Credit
Cards which will be accepted in India and abroad, across various channels like POS, Internet, IVR and mobile etc.

❖ The initial focus of NPCI would be to approach those banks who have not been issuing any payment card at all more specifically – Regional Rural Banks (RRBs) and urban co-operative banks.

❖ RuPay cards are accepted at all automated teller machines (ATMs) across India under National
Financial Switch, and under the NPCI's agreement with DFS. RuPay cards are accepted on the international Discover network.

❖ According to the data published by National Payments Corporation of India, there are around
145270 ATMs and more than 875000 Point of Sale (PoS) terminals in India under the RuPay platform.

❖ In addition to the ATMs and PoS terminals, RuPay cards are accepted online on 10,000 e-commerce websites with the same PIN which they use for ATM transactions.

❖ RuPay cards are accepted at all PoS terminals in India. To enable this, RuPay has certified 29
major banks in India to accept the RuPay card at their respective PoS terminals located at different merchant locations.

❖ NPCI has rolled out its chip card for high security transactions using EMV (Europay, Master-
Card and Visa) chip technology, which is a global standard for debit and credit cards. RuPay chip cards have an embedded microprocessor circuit containing information about the card holder and because transactions are PIN-based rather than signature- based.

❖ RuPay also provides a unified "Kisan Card", issued by banks across the country under Kisan Credit Card, enabling farmers to transact business on ATMs and PoS terminals.

Thursday, 27 August 2015

Payment Banks: Payments banks are expected to provide small savings accounts, payments/ remittance services to migrant labour workforce, low-income households, small businesses, other un-organised sector entities and other users, by enabling high volume-low value transactions in deposits and payments/ remittance services in a secured technology-driven environment. A
payment bank is covered under sections 5 (b) and 6 (1) (a) to (o) of the Banking Regulation Act, 1949.

How payment banks are different from regular banks:
These banks can only receive deposits and remittances but cannot carry out lending activities. Aiming at financial inclusion, these banks will provide banking services to migrant labourers, low income households, etc.
1. What is the maximum amount that can be saved under payment bank account?
A: The maximum deposit that a payment bank can accept from an individual customer is Rs 1 lakh.

2. Can a credit card be issued under this scheme?
A: NO

3. Can a payment bank can issue a debit and ATM cards for easy transactions?
A: YES

4. What is the amount of loan that can be sanctioned by a payment bank?
A: No Loan facility. The Reserve Bank has clearly stated that a payments bank cannot undertake any lending activity.

5. Is it safe to save money with a payment bank?
A: YES. Besides normal CRR (Cash Reserve Ratio) to be maintained with the RBI, a payments bank will be required to invest 75% of its demand deposit balances in Statutory Liquidity Ratio (SLR) eligible government securities and treasury bills. Further, a maximum of 25% will have to be held in current and fixed deposits with other scheduled commercial banks.

9. When the operations are likely to start?
A: The companies selected will be given "in-principle" approval for 18 months, after which they will be given licences if they fulfil all conditions stipulated by the RBI.

1. Allahabad Bank A tradition of trust2. Andhra bank For all your needs3. Bank of Baroda India‘s international bank4. Bank of India Relationships beyond banking5. Bank of Maharashtra One family one bank6. Canara Bank Together We Can7. Central bank Central to you since 19118. Dena Bank Trusted Family Bank9. Indian Bank Taking banking technology to the common man10. Oriental bank of Commerce Where every individual is committed11. Punjab National Bank The name you can bank on12. State bank of India With you all the way13. Syndicate bank Your faithful & friendly financial partner14. Vijaya Bank A friend you can bank on

1) There are a total of 27 PSBs in India [21 NationaliZed banks + 6 State bank group (SBI + 5 associates)]
2) At present there are 22 Private Banks functioning in India
3) At present there are 56 RRBs (Regional Rural Banks ) functioning in India.
4) At present there are 41 Foreign Banks functioning in India

Pradhan Mantri Krishi Sinchayee Yojana (PMKSY) - Agriculture Irrigation Scheme.Key points:
Scheme aims at providing irrigation facilities to every village in the country by converging ongoing irrigation schemes implemented by various ministries.
Budgetary allocation: 1,000 crore rupees for fiscal year 2015-16.
Funding Pattern: Centre- States will be 75: 25 per cent. In case of north-eastern region and hilly states it will be 90:10.

Sukanya Samriddhi Yojana: It is a small deposit scheme for the girl child.Key points of the scheme –
In one family, a maximum of two accounts can be opened for two girl children. The account can be transferred anywhere in India from one Post office/Bank to another.
Age Limit: The upper age limit of the girl child for opening this account is 10 years. The govt. has given a relaxation of one year in the upper age limit for those opening accounts till December 1, 2015.
Documents required - 1. Birth Certificate of the girl child. 2. Address proof. 3. Identity proof.
Minimum & Maximum deposit: The minimum deposit under the scheme is Rs. 1000/-. The maximum deposit is Rs. 1.5 lakhs. There is no limit on the number of investments one can make in an account either in a month or in a year.
Interest rate: The government will announce the interest rate of the scheme every year. However, the government of India has increased the rate of interest from 9.1% (2014-15) to 9.2% (2015-16) for this financial year.
Maturity period: The maturity period of the scheme is 21 years from the date of account opening, though deposits need to be made only for the first 14 years.
The minimum lock-in in period under the Sukanya Samriddhi Yojana is 11 years.

Pradhan Mantri Kaushal Vikas Yojana (PMKVY):
The scheme aims to impart skill training to youth with focus on first time entrants to the labour market and class 10 and class 12 drop outs.
The scheme will be implemented by the Union Ministry of Skill Development and Entrepreneurship through the National Skill Development Corporation (NSDC). I
It will cover 24 lakh persons and skill training would be based on the National Skill Qualification Framework (NSQF) and industry led standards

Bhagyashree scheme:
It is girl child scheme was launched in Maharashtra. Bollywood actress Bhagyashree is the brand ambassador of the scheme.Key points of the scheme:
The state government will deposit an amount of 21200 rupees in bank for a girl child born in a Below the Poverty Line (BPL) family.
The scheme aims at providing one 1 lakh rupees on maturity after the girl completes 18 years of age.
The scheme would be linked to the Beti Bachao Beti Padhao scheme of Union Government.

Rashtriya Avishkar Abhiyan (RAA):
Former President of India Dr. APJ Abdul Kalam launched the Rashtriya Avishkar Abhiyan (RAA) in New Delhi. The abhiyan aims to inculcate a spirit of inquiry, creativity and love for Science and Mathematics in school children. Rashtriya Avishkar Abhiyan is a concept developed by the Ministry of Human Resource Development. RAA is an effort to take forward the Prime Minister Narednra Modi’s vision of Digital India, ‘Make in India’ and ‘Teach in India’.

About Pradhan Mantri Jeevan Jyoti Bima Yojana:
It is a low premium insurance scheme which will link with the Pradhan Mantri Jhan Dhan Yojna. Key points of the scheme: Eligibility: Minimum 18 years and maximum 50 years and have bank account are eligible for the scheme. If the account is opened before attaining the age of 50 years, the life cover would remain intact up to the age of 55 years, if premium is paid regularly.

Premium payable for this scheme is Rs.330 per year i.e. less than Rs.1 per day.

Risk coverage of Rs.2 Lakh in case of death for any reason.

The premium paid will be tax-free under section 80C and also the proceeds amount will get tax-exemption u/s 10(10D).

About Atal Pension Yojana (APY):
It is a scheme mainly for workers in unorganised sector. The scheme will be administered by the Pension Fund Regulatory and Development Authority (PFRDA) and replace the previous government's Swavalamban Yojana NPS Lite.Key points of the scheme:

The subscribers who will joined the scheme would receive the fixed pension of Rs. 1000 per month, Rs. 2000 per month, Rs. 3000 per month, Rs. 4000 per month, Rs. 5000 per month, at the age of 60 years, depending on their contributions.

Age limit: minimum 18 years and maximum age is 40 years.

A subscriber can contribute for minimum period of 20 years or more and pension payment will start at the age of 60 years.

The government of India has decided to co-contribute 50% of the subscriber's contribution or Rs. 1000 per annum, whichever is lower, to each eligible subscriber account, for a period of 5 years, i.e., from 2015-16 to 2019-20, who join the NPS before 31st December, 2015 and who are not income tax payers.

Pradhan Mantri Suraksha Bima Yojana:
It is an insurance scheme which covers death or disablement of the policyholder caused due to accident or accidental injuries.Key points of the scheme:

Age limit: Minimum 18 yrs and maximum 70 years.

The scheme will be a one year cover, renewable from year to year and would be administered through the Public Sector General Insurance Companies in collaboration with Banks.

Risk coverage: The Pradhan Mantri Suraksha Bima Yojana will offer an accidental death and full disability cover of Rs. 2 Lakh and for partial disability cover of Rs. 1 Lakh.

Premium: Rs.12 per annum. The premium will be directly auto-debited by the bank from the subscribers' account.

Thursday, 9 July 2015

1. The main function of an Asset Management Company is to:
a) hold the securities of various schemes
b) manage the funds by making investments in various types of securities
c) hold its property for the benefit of the unit holders
d) act on behalf of SEBI
e) All the above

3. In India, conventionally, bonds are issued by institutions in ____ sector while debentures by corporate
in ____ sector.
a) private, public
b) public, private
c) either a or b
d) cooperative, NBFC
e) None of the above

6. Expand the term LIBOR as used in financial banking sectors?
a) Local Indian Bank Offered Rate
b) London-India Bureau of Regulations
c) Liberal International Bank Official Ratio
d) London Inter Bank Offered Rate
e) None of the above

7. Which one of the following rates is NOT decided by the RBI?
a) Bank Rate
b) Repo Rate
c) Reverse Repo Rate
d) Income Tax Rates
e) Only a & b

8. When more than one bank is allowing credit facilities to one party in coordination with each other under a formal arrangement, the arrangement is generally known as:
a) Participation
b) Consortium
c) Syndication
d) Multiple Banking
e) All the above

10. The first insurance company was started in India in 1818 at:
a) Kolkata
b) Chennai
c) Mumbai
d) New Delhi
e) Allahabad

11. Which one of the following is not a "Money Market Instrument"?
a) Treasury Bills
b) Commercial Paper
c) Equity Shares
d) Certificate of Deposit
e) All the above

12. The Banking Codes and Standards Board of India was registered on 18 February, 2006 under
which of the following RBI Act?
a) Banking Regulation Act
b) The Societies Registration Act, 1860
c) Cooperative Societies Act
d) None of the above
e) All the above

26. The maturity period of CDs (Certificate of Deposit) issued by banks should not be less than ____ and not more than _____, from the date of issue.
a) 7 days, 6 months
b) 7 days, 1 year
c) 15 days, 6 months
d) 15 days, 1 year
e) 90 days, 180 days

31. A rate of exchange established between any two currencies on the basis of the respective quotation
of each currency in terms of a third currency is known as:
a) Cross rate
b) Merchant rate
c) Wash rate
d) Composite rate
e) None of the above

Sunday, 17 May 2015

A commercial bank is a type of bank that provides services such as accepting deposits, making business loans, and offering basic investment products. On day to day functioning it discharge many functions broadly classified as Primary and Secondary Functions mentioned below.I. Primary Functions
1) Accepting Deposits
2) Advancing LoansII. Secondary Functions
1) Overdraft Facility
2) Discounting Bills of Exchange
3) Agency Functions
4) General Utility Functions

Primary Functions1. Accepting Deposits:
It is one of the most important function of commercial banks. The commercial banks accept the deposits at lower rates and provide the loans. They accept deposits in several forms according to requirements of different sections of the society. The main kinds of deposits are:i) Current Account Deposits or Demand Deposits:
These deposits refer to those deposits which are repayable by the banks on demand.
★ Such deposits are generally maintained by businessmen with the intention of making transactions with such deposits. The business men usually deposit from their excess cash balances and withdraw when they need.
★ They can be drawn upon by a cheque without any restriction.
★ Banks do not pay any interest on these accounts. Rather, banks impose service charges for running these accounts.ii) Fixed Deposits or Time Deposits:
Fixed deposits refer to those deposits, in which the amount is deposited with the bank for a fixed period of time.
★ Such deposits do not enjoy cheque-able facility.
★ These deposits carry a high rate of interest.iii) Saving Deposits:
These deposits combine features of both current account deposits and fixed deposits.
★ The depositors are given cheque facility to withdraw money from their account. But, some restrictions are imposed on number and amount of withdrawals, in order to discourage frequent use of saving deposits.
★ They carry a rate of interest which is less than interest rate on fixed deposits. It must be noted that Current Account deposits and saving deposits are chequable deposits, whereas, fixed deposit is a non-chequable deposit.2. Advancing of Loans:
The deposits received by banks are not allowed to remain idle. So, after keeping certain cash reserves, the balance is given to needy borrowers and interest is charged from them, which is the main source of income for these banks. Different types of loans and advances made by Commercial banks are:
i) Cash Credit: The Cash credit refers to a loan given to the borrower against his current assets like shares, stocks, bonds, etc. A credit limit is sanctioned and the amount is credited in his account. The borrower may withdraw any amount within his credit limit and interest is charged on the amount actually withdrawn.
ii) Demand Loans: Demand loans refer to those loans which can be recalled on demand by the bank at any time. The entire sum of demand loan is credited to the account and interest is payable on the entire sum.
iii) Short-term Loans: They are given as personal loans against some collateral security. The money is credited to the account of borrower and the borrower can withdraw money from his account and interest is payable on the entire sum of loan granted.

Secondary Functions1. Overdraft Facility:
It refers to a facility in which a customer is allowed to overdraw his current account up to an agreed limit. This facility is generally given to respectable and reliable customers for a short period. Customers have to pay interest to the bank on the amount overdrawn by them.2. Discounting Bills of Exchange:
It refers to a facility in which holder of a bill of exchange can get the bill discounted with bank before
the maturity. After deducting the commission, bank pays the balance to the holder. On maturity, bank gets its payment from the party which had accepted the bill.3. Agency Functions:
Commercial banks also perform certain agency functions for their customers. For these services, banks charge some commission from their clients. Some of the agency functions are:i) Transfer of Funds:
Banks provide the facility of economical and easy remittance of funds from place-to-place with the help of instruments like demand drafts, mail transfers, etc.ii) Collection and Payment of Various Bill Payments:
Commercial banks collect cheques, bills, interest, dividends, subscriptions, rents and other periodical receipts on behalf of their customers and also make payments of taxes, insurance premium, etc. on standing instructions of their clients.iii) Purchase and Sale of Foreign Exchange:
Some commercial banks are authorized by the central bank to deal in foreign exchange. They buy and sell foreign exchange on behalf of their customers and help in promoting international trade.iv) Purchase and Sale of Securities:
Commercial banks buy and sell stocks and shares of private companies as well as government securities on behalf of their customers.v) Income Tax Consultancy:
They also give advice to their customers on matters relating to income tax and even prepare their income
tax returns.vi) Trustee and Executor:
Commercial banks preserve the wills of their customers as trustees and execute them after their death as executors.4. General Utility Functions:
Commercial banks render some general utility services like:i) Locker Facility:
Commercial banks provide facility of safety vaults or lockers to keep valuable articles of customers in safe custody.ii) Traveller's Cheques:
Commercial banks issue traveler's cheques to their customers to avoid risk of taking cash during their journey.iii) Letter of Credit:
Commercial banks issue letters of credit to their customers to certify their creditworthiness.iv) Underwriting Securities:
Commercial banks also undertake the task of underwriting securities. As public has full faith in the creditworthiness of banks, public do not hesitate in buying the securities underwritten by banks.v) Collection of Statistics:
Banks collect and publish statistics relating to trade, commerce and industry. Hence, they advice customers on financial matters. Commercial banks receive deposits from the public and use these deposits to give loans. However, loans offered are many times more than the deposits received by banks. This function of banks is known as 'Money Creation'.

Sunday, 25 January 2015

1. A draft issued by the bank has been lost by the payee. He sends a letter to the issuing bank to stop payment. Bank will:
a) Note caution and will advice the payee to contact purchaser of the draft
b) Not act on the request
c) Stop payment
d) Performs no action
e) None of the above

3. What is Yield Curve Risk?
a) It is a line of graph plotting the yield of all maturities of a particular instrument
b) Yield curve changes its slope and shape from time to time
c) Yield curve can be twisted to the desired direction through the intervention of RBI
d) All of the above
e) None of the above

4. The biggest international financial centre in the world:
a) Frankfurt
b) Geneva
c) London
d) New York
e) Paris

5. The expansion of BIFR, in the context of the Indian Industry is:
a) Board for Industrial and Financial Reconstruction
b) Bureau for Industrial and Financial Reconstruction
c) Board for Investment and Financial Reconstruction
d) Bureau for Investment and Financial Reconstruction
e) None of these

7. Under which of the following methods of depreciation, amount of depreciation varies every
year?
a) Written Down Value Method
b) Straight Line Method
c) Amount of depreciation does not vary on year to year basis
d) Either a or b
e) None of these

9. Which of the following is true about "White Card"?
a) It is related to companies producing milk products
b) It does not carry on its face, the brand of the issuer
c) It is meant to covert blank money into the economy
d) It is a card that provides white money
e) None of these

13. The primary relationship between the banker and the customer is that of:
a) Trustee and beneficiary
b) Debtor and Creditor
c) Principal and agent
d) Lesser and lessee
e) None of these

14. A debt becomes time-barred after:
a) One year
b) Two and a half year
c) Three years
d) Five years
e) Six years

15. In the matter of handling bills of exchange for collection, the relationship between customer and
the bank is:
a) Trustee and the beneficiary
b) Principal and agent
c) Bailor and bailee
d) All of the above
e) None of the above

16. Hypothecation is:
a) A transaction of conditional sale
b) A legal transaction whereby goods may be made available as security for a debt
c) Transfer of ownership by the borrower to the lender
d) Either a or b
e) None of the above

17. Payment of a cheque may be countermanded by the ___
a) Payee
b) Drawer
c) True owner
d) Drawee
e) None of these

21. When does a person become insolvent?
a) When he left with no property of his own
b) When he declares an insolvent by the Court
c) When he terminates from a job he was holding
d) When he declares himself to be an insolvent
e) None of the above

22. When two parties make an arrangement to exchange future cash flows, it is called:
a) Options
b) Arbitrage
c) Swap
d) Futures
e) None of the above

23. Which of the following banks enjoys the reputation of being at the top in market capitalization among all the private banks?
a) ICICI Bank
b) HDFC Bank
c) Axis Bank
d) Yes Bank
e) IDBI Bank

24. "Claused Bill of Landing" is one which indicates:
a) Remaining constant in project cost
b) Escalation in Project Cost
c) Decrease in Project Cost
d) All of the above
e) None of the above

Domestic banks will need US $200 billion additional capital over the next five years to meet Basel- III norms for capital adequacy and the demand for funds as growth picks up, Fitch Ratings.

State bank of India has tied up with Bangalore-based mobile payments service provider Ezetap Mobile Solutions Pvt. Ltd. in association with Ezetap the bank has planned to roll out "ATM cum POS terminals".

Kotak Mahindra bank has introduced ''Kaypay payment system''. This allows the face book users to send money to each other.

Insurance Regulatory and Development Authority (IRDA) aligned it's corporate governanceand disclosure norms in accordance with the new Companies Act, 2013, through a 12-membercommittee.

As per the new guidelines of the Reserve Bank of India (RBI), banks in six metros - New Delhi,Mumbai, Chennai, Kolkata, Hyderabad and Bangalore - are free to charge other bank customersbeyond 3 ATM transactions per month. Banks have also been allowed to restrict freetransactions to 5 for customers at it's own ATM network.

HDFC became first listed Indian company to have 75% shareholding by FIIs.

Exim Bank to set up Rs. 1,500 crore funds to assist ship-building industry. To give a boost to ship building in the country, the Export-Import Bank of India (Exim Bank) is planning to set PMJDY scheme, was announced in Modi's first Independence Day speech on 15 August 2014.

Sunday, 28 December 2014

1. Who among the following is the primary regulator of Banking business?
a) Reserve Bank of India
b) Central Government
c) State Government
d) Parliament
e) a and b both the above

2. The main business of banks is to accept deposits from the public. However, a bank can refuse to
permit opening an account on behalf of _______:
a) Undesirable persons
b) Artificial persons
c) Arrested persons
d) Convicted persons
e) All of the above

3. Banks are required to monitor transactions of suspicious nature for reporting to the authorities under anti- money laundering measures. The purpose of reporting is:
a) Combating finance of terrorism
b) To check hawala transactions
c) To check the inflow of crime money
d) To check inflow of the money earned out of sale of narcotics
e) All the above

5. If a company, which is not a non - banking financial company wants to collect public deposits, it is governed by ___ Act:
a) RBI Act 1934
b) Banking companies Act
c) Companies Act 1956
d) Central Government
e) None of the above

6. Companies whose main business is not financing or lending are permitted to accept deposits under section 45(s) of RBI Act only from:
a) Public
b) Relatives in the from of loans
c) Friends
d) All of the above
e) None

7. Every Banking company is required to use the word Bank in its name and no company other than a Banking company can use the words Bank, Banker or Banking as a part of its name as per:
a) Section 7 of Banking Regulation Act
b) Section 7 of RBI Act
c) Section 7 of SEBI Act
d) Section 7 of Nationalization Act
e) None of the above

8. In India, it is necessary to have license from the RBI for opening a new branch. This is a requirement under ____ Act
a) Section 22 of banking Regulation Act
b) Section 22 of RBI Act
c) Section 22 of NABARD
d) KYC Guidelines by RBI
e) a and b above

9. Section 6(A) of B.R. Act has given the list of ancillary services which can be rendered by a Bank under the Banking Regulation Act. in the event that a Bank wants to undertake any other services (other than the list):
a) the bank can seek authority from the RBI
b) Board of directors of that Bank can decide the business suitable to the bank
c) it can be decided by the Bank in the shareholders meeting
d) Bank can do so if that business is notified by the Central Government as the lawful business of a Banking company
e) None of the above

10. Banking Companies are prohibited under Sec 8 of banking Regulation Act to sell and purchase
securities. Yet Banks are selling securities (of the customer) which are under pledge as permitted by:
a) Indian Contract Act
b) SARFAESI Act
c) Government Notification
d) Banking Regulation Act
e) None of these

11. Section 9 of the Banking Regulation Act prohibits the banking Companies from holding any
immovable property except for its own use for a period of not more property. The RBI may extend this period for a further period of ______:
a) 2 years
b) 4 years
c) 5 years
d) 6 years
e) None of the above

12. Which of the following stock exchange is derecognized by SEBI on 19.11.2014 on the allegations of serious irregularities in its functioning?
a) Bombay Stock Exchange
b) Delhi Stock Exchange
c) Calcutta Stock Exchange
d) Bangalore Stock Exchange
e) None of the above

13. Which of the following is not a function of General Insurance?
a) Cattle Insurance
b) Crop Insurance
c) Marine Insurance
d) Fire Insurance
e) Medical Insurance

14. Liability- side of the balance-sheet comprises:
a) Capital and reserve
b) Long-term liabilities
c) Current liabilities
d) All of the above
e) None of the above

15. Minimum cash reserves fixed by law constitute ___
a) A percentage of aggregate deposits of the bank
b) A percentage of aggregate loans and advances of the bank
c) A percentage of capital & reserves of the bank
d) All of the above
e) None of these

16. Which of the following organizations/ agencies has sought an emergency fund of Rs.1000 crore
from banks to tackle acute liquidity crisis, which is coming in the way to give loans to micro borrowers?
a) Regional Rural & Cooperative Banks
b) RBI
c) Micro Finance Institutions
d) NABARD
e) None of the above

17. Which of the following types of accounts are known as "Demat Accounts"?
a) Zero Balance Accounts
b) Accounts which are opened to facilitate repayment of a loan taken from the bank. No
other business can be conducted from there
c) Accounts in which shares of various companies are traded in electronic form
d) Accounts which are operated through internet banking facility
e) None of the above

The economic development of a nation is reflected by the progress of the various economic units, broadly classified into corporate sector, government and household sector. While performing their activities these units will be placed in a surplus/deficit/balanced budgetary situations.
There are areas or people with surplus funds and there are those with a deficit. A financial system or financial sector functions as an intermediary and facilitates the flow of funds from the areas of surplus to the areas of deficit. A Financial System is a composition of various institutions, markets, regulations and laws, practices, money manager, analysts, transactions and claims and liabilities.

The word "system", in the term "financial system", implies a set of complex and closely connected or interlined institutions, agents, practices, markets, transactions, claims, and liabilities in the economy. The financial system is concerned about money, credit and finance-the three terms are intimately related yet are somewhat different from each other. Indian financial system consists of financial market, financial instruments and financial intermediation.

Financial Markets
A Financial Market can be defined as the market in which financial assets are created or transferred. As against a real transaction that involves exchange of money for real goods or services, a financial transaction involves creation or transfer of a financial asset. Financial Assets or Financial Instruments represents a claim to the payment of a sum of money sometime in the future and /or periodic payment in the form of interest or dividend.

Money Market:
The money market is a wholesale debt market for lowrisk, highly-liquid, short-term instrument.
Funds are available in this market for periods ranging from a single day up to a year. This market is dominated mostly by government, banks and financial institutions.

Capital Market:
The capital market is designed to finance the long-term investments. The transactions taking
place in this market will be for periods over a year.

Forex Market:
The Forex market deals with the multicurrency requirements, which are met by the exchange of currencies. Depending on the exchange rate that is applicable, the transfer of funds takes place in this market. This is one of the most developed and integrated market across the globe.

Credit Market:
Credit market is a place where banks, FIs and NBFCs purvey short, medium and long-term loans to corporate and individuals.

Financial Intermediation:
Having designed the instrument, the issuer should then ensure that these financial assets reach the ultimate investor in order to garner the requisite amount. When the borrower of funds approaches the financial market to raise funds, mere issue of securities will not suffice. Adequate information of the issue, issuer and the security should be passed on to take place. There should be a proper channel within the financial system to ensure such transfer. To serve this purpose, financial intermediaries came into existence. Financial intermediation in the organized sector is conducted by a wide range of institutions functioning under the overall surveillance of the Reserve Bank of India. In the initial stages, the role of the intermediary was mostly related to ensure transfer of funds from the lender to the borrower. This service was offered by banks, FIs, brokers, and dealers. However, as the financial system widened along with the developments taking place in the financial markets, the scope of its operations also widened. Some of the important intermediaries operating ink the financial markets include; investment bankers, underwriters, stock exchanges, registrars, depositories, custodians, portfolio managers, mutual funds, financial advertisers financial consultants, primary dealers, satellite dealers, self regulatory organizations, etc. Though the markets are different, there may be a few intermediaries offering their services in move than one market e.g. underwriter. However, the services offered by them vary from one market to another.

Tuesday, 23 December 2014

Banking, in the present form might have evolved during the 17th century. Kautilya, in his ‘Arthashastra’ written in about 300 B.C., has also mentioned about the existence of powerful guilds of merchant bankers who received deposits, and advanced loans and issued hundis (letters of transfer). In the modern times, an experienced Scottish goldsmith, William Paterson, is credited with the idea of setting up a national bank in Britain in 1688, which gave birth to the Bank of England. The modern day banking, in its simplest form, is meant to facilitate financial intermediation between the savers and the borrowers. It also seeks to act as a safe place to store money and earn some return in the process, as also a place to seek simple financial solutions to individual problems.The advent of technology in modern times has heralded three distinct phases in banking: a) Computerization of back office processes during the 1980s,b) Facilitating higher customer convenience during the 1990s andc) Enabling lifestyle/life stage banking during the 2000sThus, over time, the banks have witnessed significant changes in their outlook and have emerged as financial supermarkets offering a range of complex financial products and services on a round the clock basis, duly customized to the needs of their customers through multiple delivery channels

RBI

Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the RBI Act, 1934 (the Act). This marked the culmination of the prolonged efforts, to set up a central bank in the country. The principle of aligning the regulatory structure to the specific needs of the country and for that matter to even go beyond the prevalent wisdom and ethos were distinctly visible at that time itself. Despite the Reserve Bank being constituted as a central bank, it was thought fit to prescribe in the statute itself a development role for the Reserve Bank. Accordingly, the Act has a provision that the Reserve Bank will develop and maintain expertise in agricultural development (later expanded as rural development) and related subjects and thus began the role of the central bank being sensitive to the need of the economy. As such, after independence in the year 1947, the Indian banking industry was brought under the regulatory ambit of the Reserve Bank of India.1)Banking Companies Act was passed in the year 1949.2)Later, in March 1966, certain co-operative societies were brought within its fold and this act was renamed as the Banking Regulation Act, 1949 (BR Act). This enactment brought significant powers to the Reserve Bank of India (RBI) over the banks.Private banks were then on the scene, though the money lenders were the major source of funding. A usurious and exploitative system prevailed Promotional and Developmental role of the Central Bank in IndiaThe basic function of the Reserve Bank, according to the preamble of the Reserve Bank of India Act, is to regulate the issue of Bank notes and the keeping of the reserves with a view to maintaining monetary stability in India and generally to operate the currency and credit system of the country to its advantage.This function imposes on the Reserve Bank the responsibility for: i. Operating the monetary policy for maintaining price stability and ensuring adequate financial resources for developmental purposes;ii. Promotion of the efficient financial system; and iii. Meeting the currency requirement of the public.

Establishment of Specialized Institutions:-

1. Reserve Bank established a separate institution, viz., the National Bank for Agricul- ture and Rural Development (NABARD) for provision of medium-term and long-term refinance for agriculture and rural development as also for providing consultative service to the Government and banks and generally coordinate its activities in area of agricultural credit with those of the agencies engaged in purveying such credit.RBI promoted of Industrial Finance Corpo-ration of India (IFCI), State Financial Corporations, Industrial Development Bank of India (IDBI) and Unit Trust of India (UTI). Reserve Bank promoted the Deposit Insurance and Credit Guarantee Corporation of India Limited (DICGC) for providing insurance and guarantees against the risk of default in payment by the banks or to the banks. Further, the Reserve Bank also helped establish specialized institutions for specific type of financing, likei. National Housing Bank (NHB) andii. Export Import Bank of India (EXIM Bank).iii. Discount Finance House of India (DFHI) and the Securities Trading Corporation of India (STCI).iv. Clearing Corporation of India Ltd (CCIL)v. National Payment Corporation of India Ltd (NPCI).Expansion of the scope and reach of the Indian banking system:Even though, up to the late 1960’s the Indian banking system made reasonable progress, there were still many rural and semi-urban areas which were not served by banks. The large industries and the big and established business houses tended to enjoy a major portion of the credit facilities, to the detriment of the priority sectors such as agriculture, small-scale industries and exports. Thus, with the primary objective of achieving efficient distribution of resources in conformity with the requirements of the economy and in order to meet the needs of the priority sectors, the Government decided to introduce social control over banks by amending the banking laws. Accordingly, on July 19, 1969 and April 15, 1980 respectively, 14 and six major Indian scheduled commercial banks in the private sector were nationalised. Social control marked a transitory stage in the evolution of banking policy and in this process; a system of credit planning and the Lead Bank Scheme were operationalized by the Reserve Bank to make the banking system function as an instrument of economic and social development. In conformity with these desired objectives of social control, the banking policy was reoriented in the seventies for securing a progressive reduction in poverty, concentration of economic power and regional disparities in the banking facilities. The promotional aspects of the banking policy came into greater prominence. In this direction, the branch expansion policy was designed, among other things, as a tool for reducing inter-regional disparities in banking development, deployment of credit and urban-rural pattern of credit distribution. Administered interest rate policy emerged as an important instrument for directing the flow of funds and for augmenting the pace of deposit mobilisation. The Reserve Bank opted for selective extension of credit under the Selective Credit Control scheme to those sectors that were accorded priority in conformity with the national objectives. The objective was to correct undue price fluctuations in respect of certain commodities such as food grains and agricultural raw materials arising from speculative activities. The main instruments of Selective Credit Control were a) minimum margins for lending and b) ceilings on the level of credit against stocks of selected commodities to control the quantum of credit given.The period since 1985 was a process of consolidation which involved, i) comprehensive action plans by banks covering organization, structure, training, house-keeping, customer service, credit management and recovery of bank dues, productivity and profitability,ii) phased introduction of modern technology in banking operations with emphasis on financial viability by easing some of the policy related constraints on profitability,iii) strengthening capital base of banks and iv) allowing them flexibility in several areas.By the end of eighties, the Indian economy had developed an extensive financial superstructure consisting of a vast network of institutions, deploying varied instruments and facilitating the mobilisation and channeling of funds for working capital and production credit purposes as well and for long term investment. The Reserve Bank thus helped promote and nurture a functionally varied and spatially diversified financial system.

NABARD

National Bank for Agriculture and Rural Development (NABARD) was established on 12th July, 1982 under the National Bank for Agriculture and Rural Development Act, 1981 by merging the Agriculture Credit Department and Rural Planning and Credit cell of RBI. It took over the entire functions of the Agriculture Refinance and Develop-ment Corporation (ARDC). NABARD was established with the recommendations of CRAFICARD Committee. Its head office is situated at Mumbai. It planned to open offices through out India. In the beginning the paid up capital of the NABARD was Rs.100 Crores contributed by the Govern-ment of India and RBI jointly. Its authorized capital raised to Rs.1000 Cores. The other funds of NABARD werea. National Rural Credit (Long Term Operations) Fund b. National Rural Credit (Establishment ) Fundc. Funds raised by issue of bonds and deben tures guaranteed by the Central Government d. Borrowing from RBI, Central Government or any other organisations approved by the Central Governmente. Funds from external sources through the Government What are the functions of NABARD?Ans: 1. Credit functions 2. Development functions 3. Regulatory functions

Credit functions:NABARD is an apex development bank for agriculture and rural development. It has been established for providing credit for the promotion of agriculture small scale industries, cottage and village industries, handicrafts and the rural crafts and other allied economic activities in rural areas with a view to promote integrated rural development and securing prosperity in rural areas. It also provides refinance facilities to commercial banks, RRBs, Co-operative banks, Land Development Banks and other financial institutions. It also provides refinance for loans granted under IRDP scheme. Basis of refinance by the NABARD is the percentage of recovery during previous year. Development functions: NABARD also undertakes the functions of co-ordination of various institutions in this area, acting as an agent to the Government and RBI, providing training and research facilities and development of expertise in the field.Regulatory functions: The Banking Regu- lation Act, 1949 authorises NABARD to inspect RRBs and Co-operative banks (other than primary co-operative banks). These banks file returns to NABARD and also obtain recommendations from NABARD in case of opening of new branches.NABARD is managed by a Board of Direct- ors consisting ofi. Chairmanii. Directors nominated by RBI, Government of India, State Governmentsiii. Experts from Commercial and Cooperative Banksiv. Experts in Rural economics

2. In the recent months, Indian Rupee depreciated heavily against US Dollar. Rupee depreciation means?a) Value of Rupee decreasing against a basket of currenciesb) Less number of Rupees per US Dollarc) More number of Rupees per US Dollard) Less number of Dollars per Rupeee) None of the above

4. Food Security Bill is recently passed by Parliament. What does the Food Security Bill intend to achieve?a) At least 3kg of food grains per person per month to be given to general category households, at prices not exceeding 50% of Minimum Support Price.b) Up to 75% of the rural population and up to 50% of urban population are to be covered under Targeted Public Distribution System.c) Children aged six months to 14 years would get take-home ration or hot cooked food.d) The oldest adult woman in each house would be considered the head of that househole when issuing the ration card.e) All of the above

6. In India, Capital Markets are regulated by?a) Securities and Exchange Board of Indiab) Reserve Bank of Indiac) State Bank of Indiad) International Monetary Funde) None of the above

7. RAND is the currency of ?a) China

b) Japan

c) North Korea

d) South Africa

e) None of the above

8. Recently RBI took several steps to control Rupee depreciation. Reason(s) for to Rupee depreciation?a) Exports become costlierb) Imports become costlierc) Imports become cheaperd) Both (a)&(c) e) None of the above

19. As per findings of the recent Raghuram Rajan Committee report which State is the most developed?a) Kerala

b) Goa

c) Gujarat

d) Tamilnadu

e) None of the above

20. As per the insurance bill, 2013, Foreign Investors can hold up to?a) 51% of the capital in an Indian insurance companyb) 39% of the capital in an Indian insurance companyc) 49% of the capital in an Indian insurance companyd) 29% of the capital in an Indian insurance company

e) None of the above

21. Statutory Liquidity Ratio (SLR) refers to the amount that the commercial banks require to maintain with RBI. What are the permitted SLR investments?a) Only Gold

b) Gold or Govt approved Securities

c) Only Govt approved Securitiesd) Only Cash

e) None of the above

22. Direct Taxes Code (DTC) is intended to be introduced in the monsoon session of Parliament. DTC seeks to replace?a) Indian Contract Act

24. In July 2013, SEBI Act was amended to curb Ponzi schemes. Ponzi Scheme means?a) Name of a Mutual Fund Scheme to earn higher returnsb) Collective investment Schemes floated by fly by night operatorsc) Name of a Bank Deposit Productd) Name of a Health Insurance schemee) None of the above

25. The minimum rate of Interest charged by a Bank from Customers on the loans is?a) Base Rate

b) Bank Rate

c) Prime Rate

d) Prime Lending Rate

e) None of the above

26. Which of the following is NOT true with regard to FCNR Accounts?a) NRIs can open the Accountb) Can be opened in 'Permitted Currency' onlyc) Minimum Term is 1 yeard) Maximum Term 5 yearse) None of the above

27. REPO rate means?a) Rate at which the RBI will borrow from the banksb) Rate at which banks will borrow from other banksc) Rate at which the RBI lends to banksd) Rate at which banks lend to customerse) None of the above

28. Fiscal Deficit Refers to?a) The difference between the government's total expenditure and its total receipts(including borrowing)b) The difference between the government's total expenditure and its total receipts(excluding borrowing)c) The difference between the government's Tax collections and Salary paymentsd) The difference between the government's Tax collections and government's Borrowings

e) None of the above

29. "DAX" is the stock market in?a) Germany

b) USA

c) France

d) Hongkong

e) None of the above

30. Which of the Public Sector bank tag line "India's International Bank" ?a. SBI

b. PNB

c. ICICI

d. HDFC

e. BOB

31. Which bank has launched "travel card" for students joining abroad?a. SBI

b. PNB

c. ICICI

d. HSBC

e. ICICI

32. Who is the Chairman of the committee set up to scrutinize applications for new Bank licenses?a) Usha Thorat

b) Bimal Jalan

c) C B Bhave

d) S Damodaran

e) None of the above

33. Who is the World Bank President?a) Christine Legrade

b) Jim Yong Kim

c) Raghuram Rajan

d) Monteksingh Ahluwalia

e) None of the above

34. Ben Bernanke is the Chairman of Federal Reserve. What is Federal Reserve?a) Central Bank of UK

38. What is a stale cheque?a) A cheque issued without drawer's signature.b) A cheque with only signature of the drawer.c) A cheque which has completed 3 months from the date of its issue.d) Any one of the above.

e) None

39. Interest on savings bank account is now calculated by banks on?a) Minimum balance during the monthb) Minimum balance from 7th to last day of the monthc) Minimum balance from 10th to last day of the monthd) Maximum balance during the monthe) Daily product basis

40. Largest shareholder (in percentage shareholding) of a Nationalized bank is ?a) RBI